Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (August 2012)
32 slides from Phillips 66's investor presentation, August 2012
Slide 1: Investor Update
Investor Update July / August 2012
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Wo
Slide 3: Phillips 66 – The Advantaged Downstream Energy Company
Phillips 66 – The Advantaged Downstream Energy Company Adjusted Earnings ($B) Industry-leading 4 Midstream Refining & Marketing 3.6 Chemicals Chemicals R&M 3 Midstream Total Financial strength 2 Earnings growth 1.8 Returns enhancement 1 Shareholder distributions 0.5 0 2009 2010 2011 3
Slide 4: Improving Returns and Earnings
Improving Returns and Earnings R&M ROCE Midstream ROCE 12% Adjusted Earnings 30% $0.2 B - 2009 - $0.2 B 20% 18% $1.2 B - 2010 - $0.3 B 5% 1% $2.7 B - 2011 - $0.4 B 2009 2010 2011 2009 2010 2011 Chemicals ROCE Phillips 66 ROCE 28% 14% Adjusted Earnings 21% $0.2 B - 2009 - $0.5 B 11% $0.5 B - 2010 - $
Slide 5: Optimizing Portfolio
Optimizing Portfolio Refining Capacity Chemicals Capacity Midstream Capacity MM Bbls crude oil/day B pounds/yr DCP BCF/D 16% reduction 8% increase 6% increase 2.7 31 7.2 6.8 29 2.2 2009 2011 2009 2011 2009 2011 3-Yr ROCE 6% 3-Yr ROCE 20% 3-Yr ROCE 23% Shifting portfolio to higher-r
Slide 6: High-Performing Businesses
High-Performing Businesses R&M Chemicals Midstream 2011 ROCE (%) 2011 ROCE (%) 2011 ROCE (%) MPC 20 CPChem 25 DCP 19 Midstream XOM 19 XOM Chem 22 MWE 14 PSX 12 LYB 20 OKE 14 CVX 12 WLK 20 EPD 11 TSO 12 DOW 11 VLO 8 R&M: Net Income adjusted for special items / Debt + Equity. XOM R&M ROCE as disclosed
Slide 7: North American Supply Growth
North American Supply Growth 5 U.S. Lower 48 Onshore Oil Production MMBD 4.39 4 NGL Production (ex. Refining) 3 5,000 MBD 2.26 2.13 2 +52% Woodford Granite Wash 1 3,750 Niobrara Bakken Avalon 0 2009 2011 2013 2015 2017 2019 Marcellus 2,500 U.S. and Canada Natural Gas Supply Eagle Ford 100 BCFD Barne
Slide 8: External Environment – Market Assumptions
External Environment – Market Assumptions U.S. shale gas and oil Supply U.S. NGLs Growth Canadian oil sands Ethanol and biofuels Non-OECD energy demand Expanding Distillate outpacing gasoline demand Demand U.S. NGL demand Renewables mandates Relentless Product specifications Regulatory Stricter pipe
Slide 9: Selected Refining Margins and Differentials
Selected Refining Margins and Differentials Global 3-2-1 ($/BBL) Ethylene Cash Margin ($/Ton) External 30 Range 1,000 Ethane Derived 600 15 Naphtha Derived 200 0 (200) 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Brent / WTI Differential ($/BBL) Henry Hub ($/MMBTU) 6 30 External External Range
Slide 10: Key Initiatives
Key Initiatives Creating differential shareholder value Continuously improving operating excellence Enhancing financial strength and flexibility Allocating cash flow well Growing Chemicals capacity Expanding Midstream business Improving normalized R&M returns Executing the plan 10
Slide 11: Strong Portfolio
Strong Portfolio R&M Midstream Chemicals 15 refineries (11 in US) 50/50 JV with Spectra - DCP 50/50 JV with Chevron - Nelson complexity of 11 Large U.S. gatherer & CPChem 2.2 MMBPD refining processor NA’s largest producer of capacity Large U.S. NGL producer HDPE ~10,000 marketing o
Slide 12: Refining Assets
Refining Assets Throughput Capacity Western / Pacific Central Corridor Gulf Coast Atlantic Basin / Europe United States FD 439 588 Ireland BI 2,231 MBD BW WG HU 471 SF 733 WR United Kingdom LA PC BG Distillate Capacity LC AL SW Germany Mi 285 200 Malaysia 1,015 ME MBD 175 355 12 Capacity is net PSX.
Slide 13: Marketing and Specialty Businesses
Marketing and Specialty Businesses U.S. Marketing Ensures refinery off take Highly integrated with refining assets European Marketing Highest market efficiency Strong ROCE Lubricants Large finished lubes supplier Co-located with refineries Flow Improver High-return business Strong market share Avera
Slide 14: Chemicals
Chemicals 50/50 JV with Chevron – CPChem CPChem Global portfolio Net Capacity > 30 B Lbs/Year 80% of capacity in U.S. Specialties, Aromatics Olefins/ and Advantaged feedstock position Polyolefins Styrenics 70-80% of U.S. capacity is ethane-based Proprietary technology drives competitive advantage #1
Slide 15: Midstream
Midstream 50/50 JV with Spectra – DCP Large U.S. NGL producer Wattenburg Large gatherer and processor Powder River Blue Line Wood River Conway Assets overlay shale plays Shocker Chisholm Growing MLP – DPM Ponca City Borger Phillips 66 Midstream Skelly Belvieu Southern Hills U.S. fractionation positi
Slide 16: Differentiated Portfolio
Differentiated Portfolio Capital employed of $24 B at year-end 2011 Refining represents ~40% of 2009-2011 adjusted earnings 2011 Capital Employed 2009 – 2011 Adjusted Earnings 5% 14% 11% 40% 54% 22% 30% 24% Refining Marketing & Specialties Chemicals Midstream Corporate and Other excluded from Capita
Slide 17: Strategic Priorities
Strategic Priorities Enhance return on capital Portfolio optimization Margin improvement Deliver profitable growth Chemicals expansion Midstream growth Specialties and transportation Grow shareholder distributions Regular dividends Share repurchases 17
Slide 18: Enhance Return on Capital
Enhance Return on Capital Optimize portfolio Capital Expenditures ($B) Shift capital employed to higher PSX CPChem* DCP* returning assets/segments 2.5 Continuous high-grade of portfolio Midstream 2.0 Improve margins 1.5 Capture advantaged feedstock 1.0 Grow clean product yield 0.5 Increase access to
Slide 19: Optimize Portfolio
Optimize Portfolio Shifting Capital Employed 5% Increase investment in 10% higher-returning businesses 11% 25% Midstream 20% Rationalize low-returning 25% Chemicals refining assets 84% Disciplined portfolio 70% R&M 50% management process 2011 Mid-Term Long-Term Improving capital efficiency through p
Slide 20: Capture Advantaged Feedstock Opportunities
Capture Advantaged Feedstock Opportunities Shale oil to Phillips 66 refineries 100 MBD – Current shale oil Crude Advantage (%) processed 460 MBD – Total shale oil processing capability 38.3% Brent/LLS/ 46.5% HLS/ANS Billings advantaged crude project Enables 100% heavy sour Heavy / crude slate 31.7%
Slide 21: Increase Exports
Increase Exports Canadian Increased exports in 2011 Oil sands Additional planned export Bakken capability increases Coastal refineries Niobrara Granitewash Phillips 66 Exports (MBD) Actuals Capability Bone Spring U.S. Product Exports Eagle Ford 220 155 U.S. Product 101 Exports Increasing Product Vol
Slide 22: Margin Improvement
Margin Improvement Controllable Costs ($B) Manage costs Target $200 MM cost reduction – Eliminate spin-related 3.7 3.9 3.9 dis-synergies Drive unit operating costs lower Potential procurement savings 2009 2010 2011 Clean Product Yield Increase clean product yield Wood River CORE project Close conver
Slide 23: Deliver Profitable Growth
Deliver Profitable Growth Chemicals Olefins and polyolefins Derivatives Midstream NGL logistics Gathering and Processing capacity Refining & Marketing Specialties and transportation Limited opportunities for profitable capacity growth 23
Slide 24: Chemicals Growth
Chemicals Growth Middle East Saudi Arabia: S-Chem and Saudi Polymers Company ventures Qatar: Q-Chem I and Q-Chem II ventures Pursuing additional opportunities U.S. 2013 NGL fractionation expansion at Sweeny 2014 start-up of Cedar Bayou 1- hexene plant 2017 Gulf Coast ethane cracker and ethylene deri
Slide 25: Midstream Growth – DCP Opportunities
Midstream Growth – DCP Opportunities LaSalle ~$4 B of growth projects in Plant execution Conway Online 2011 – 2014 >$2 B of additional opportunities Online 2012 – 2014 Adding >500 MBD NGL logistics Southern Hills capacity Pipeline Increasing gathering and processing capability Sand Hills Optimizing
Slide 26: Shareholder Distributions
Shareholder Distributions Dividends Share repurchases Initial quarterly dividend of Cash available after funding $0.20/share dividend growth and sustaining capital Expect annual increases Uses of excess cash Affordable – Growth capital – 2013 expected dividend cost of ~$500 MM – Debt reduction – ~20
Slide 27: Financial Strength and Flexibility
Financial Strength and Flexibility Strong investment grade – BBB/Baa1 Good liquidity with extended maturity profile Initial debt outstanding of $8 B Weighted average interest cost of 3.5% pre-tax 20-30% debt to total capitalization ratio target Reduce debt Increase cash balance Fund capital and dist
Slide 28: Compelling Investment Opportunity
Compelling Investment Opportunity Execution…building high-performing businesses Growth…investing in Chemicals and Midstream Returns…improving portfolio and margins Distributions…growing dividends and repurchases The Advantaged Downstream Energy Company 28
Slide 29: Appendix
PHILLIPS Investor Update Appendix
Slide 30: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations $ Millions $ Millions 2011 2010 2009 2011 2010 2009 1 Adjustments Earnings $ 4,775 735 476 R&M Less Adjustments Gain (loss) on asset sales 1,629 116 32 Gain (loss) on asset sales 1,545 116 120 Impairments (314) (8) (116) Impairments (318) (1,118) (116) Cancelled projects
Slide 31: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations PSX - ROCE Chemicals - ROCE 2011 2010 2009 2011 2010 2009 Numerator ($MM) Numerator ($MM) Net income 4,780 740 479 Net income 716 486 228 After-tax interest expense 11 1 1 After-tax interest expense - - - GAAP ROCE earnings 4,791 741 480 GAAP ROCE earnings 716 486 228 No
Slide 32: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations $ Millions Three 2011 2010 2009 Year Average 1 Marketing, Specialties and Other Earnings 2,200 566 420 1,062 Less Adjustments Gain (loss) on asset sales 1,629 116 32 592 Impairments - (8) (116) (41) Pending claims and settlements - 35 - 12 Total Adjustments 1,629 143 (84